Thursday, July 5, 2012

The Golden Age of Whiskey is Over

A few years ago, people started talking about this period as the Golden Age of Whiskey. I'm not sure who coined the phrase, but it might have been Chuck Cowdery, who also wrote about it in the most recent edition of his Bourbon Country Reader in which he questions whether the Golden Age is good or bad for consumers.

The thing about this Golden Age, though, is that it's over. Like an economic recession, it's hard to judge exactly when a Golden Age ends until it's been over for some time, but I would estimate that it began in the late 1990s and ended around 2009.

These are the elements that characterized the Golden Age of Whiskey:

Improved quality: Whiskey was simply better than ever with the advent of the Buffalo Trace Antique Collection, the Van Winkle line, the expansion of Four Roses to the US, the resurrection of rye, more great Scotch than ever coming to the US, and the introduction of quality Irish and Japanese whiskeys

Availability of Closed Distillery Whiskey: Whiskey from Michter's, Stitzel-Weller, Brora, Port Ellen and other closed distilleries was available at fairly reasonable prices. In 2003, you could easily find a Port Ellen independent bottling for under $200 and an A.H. Hirsch for $75.

Innovation: Companies like Buffalo Trace, Bruichladdich, Compass Box and others pushed the boundaries of age, peat, proof, barrel management and other elements, along with eliminating added coloring and chill filtering.

Dusties: There was still a plethora of dusties on the shelves and people seemed to have no problem finding really good old whiskey.

Availability and Reasonable Prices: All of this whisky was widely available and reasonably priced. There was a time when you could walk into a store at nearly any time of year and find Pappy Van Winkle, George T. Stagg and other whiskeys that barely touch store shelves these days.

In contrast, today's whiskey market is characterized by the following:

Younger whiskeys and dropped age statements: Because it's become so popular, whiskey is being marketed younger and without age statements. Macallan is the latest, and most dramatic, distillery to eliminate age statements, but it's happened to so many bourbons it would be difficult to list them all. We are all paying more for less.

Inflation and Over-Pricing: Whiskey prices in both the primary and secondary markets are through the roof. Limited releases and gimmicks abound to wrench every last dollar from the thirsty public. Price to quality ratios are completely out of whack, and the secondary market seems to have no ceiling for even recent whiskeys, which in turn drives up prices in the primary market from companies that see they are not realizing their full potential profit.

Availability: Scarcity is now a huge issue. As distilleries run out of their glut whiskey, consumers suffer shortages, particularly of rye whiskeys lately, and people fight over each release of Pappy Van Winkle and the BTAC like it's this year's must-have Christmas gift.

Gimmicks vs. Innovation
It seems that gimmicks have replaced innovation as the centerpiece of new whiskeys. We hear less about new techniques and more about the whiskey that went to space, was based on a replica or survived a natural disaster. Finishing was innovative when it first appeared, but now it's old hat, yet distilleries still crow every time they dump a whiskey into a wine barrel for two months. There are still vast areas of whiskey production that have yet to be explored (yeast anyone? corn varieties?), and while innovation still exists, the big ideas of the earlier period seem to have been replaced by gimmicks.

Now, I'm not saying there isn't great whiskey and even reasonably priced great whiskey on the market, but I do think there is much less of it. In part, whiskey is a victim of its own success, and there is just not enough to go around, but companies which are putting profit ahead of quality are also to blame. All of these factors have conspired to change the market and end the Golden Age.

Not all is lost though; there are a number of promising signs. Distilleries are increasing capacity and new distilleries open every day. Many of the new distilleries have put out some terrible stuff, but all it takes is a few gems to grow and thrive. I would guess that in ten to fifteen years, once all of this new whiskey, micro and macro alike, has had time to age, we may enter a Silver Age...and when we do, I'll be there.

David D, I should hand it to you guys that you are bucking the trend here with your private bottling program. K&L, The Party Source and some other retailers are some of the few who are still consistently releasing interesting, affordable bottles. How long you can keep it up I don't know, but you guys are definitely where it's at.

There are, I think, two big possibilities here: The market continues to rise and eventually yes, we do see a Silver Age of sorts. And I'll be there for sure.

The other is a repeat of 30 years ago. Overproduction, gluts, closed distilleries as the Asian and South American markets realize, "Holy crap, we can totally overpay for vodka and feel way less guilty mixing it with hi-c and five alive". Distilleries close and we're having single cask Roseisles in 2030 while scooping up closed distilleries that are current mainstays.

I think we need more walmartizing in whiskey stores. I need one store, not far from my house that has everything I need. Not 25 stores within a mile of my house with the same bottle of knob creek on the shelf for $39.99.

I'll probably end up writing a whole piece about this, but my wife and I were talking yesterday about the amount of business being done with customers who don't know the difference. They don't know that Macallan is now using younger whisky. They don't know that Foreigner only has one original member left in the band. They don't know and they don't care. They just want to get drunk and dance. If that's the case, then why take all the time to clarify what age statements mean if most people will buy it anyway? That's the battle we're facing.

Tim, I don't think a glut would necessarily be a bad thing. It's the mass popularity of whiskey that's creating an issue now. The Golden age marked the period between the glut and our current market. Enthusiasts who can get in on that cresting period will be lucky.

Lazer, we have that in California with BevMo and it's okay for the everyday stuff, but not for anything really unique.

@David D I guess a question stemming from that is whether it's a good idea for the distilleries to be planning their product lines 10-20 years out for those kinds of drinkers. Fashion is fickle and the less invested people are in the product, the more likely they're going to be to turn somewhere else. Tim's predictions may be right on the mark.

I think Tim's predictions are right on the mark indeed. There's no way we're not going to end up in a glut. A glut is no problem however if they lower prices in response. The problem is going to after they raise prices for the shortage and get greedy when it's no longer a matter of supply and demand.

"Hey boss, supply is back up again. Should we bring the price on the whisky back down now that our stocks are secure?"

"Uh...mm...well we don't want to do anything too drastic here! Let's...uh...table this conversation for another time, Johnson."

Whiskey is the new baseball cards. I started collecting baseball cards in 1989, as they were being massively over produced. The market crashed around 92 and everything after 88 is pretty much worthless. I hit comic books right after and it followed the same cycle. Then action figures. Each time I was left with the worthless collectible.

Have you noticed the cycles aren't so random anymore?

I started my espresso hobby 3 years ago, missing the period where vintage espresso machines were practically given away on ebay. They have increased in some cases 500% to 1000% in less than 10 years. It's on the same cycle you are attributing to whiskey, and this is actually happening in tons of hobbies right now.

The rise of the internet has created the hobbyist connoisseurs market. Enthusiast communities are sharing info and making it easy for everyone to be an enthusiast, or just buy like one. Given these circumstances I'm not sure if we can count on another crash. The secret is out and it's not easy to hide it again when the information on what is good is available on the internet for all to discover. Will people lose interest or will more and more people continue to discover it?

One of these days I'm going to catch a hobby before the wave. And if whiskey does crash, well, I plan on drinking all mine anyway.

In regards to fighting over Van Winkle bottles, the Van Winkles are furious and teaming up with Buffalo Trace to put a stop to the Sellers moving their whiskey on Ebay. They want the common man to be able to drink their whiskey and this is not happening. And, they don't mind their older bottles being sold on there.

Someone had to say it, Sku, and you brilliantly put words to what is becoming more and more clear each day, bravo!

The best thing about this "new guard" is that the people with money have reason to invest their money in start-up distilleries. I can't wait to see what the minority cream of the crop of these nascent distilleries is up to in twenty years. Alright, I'll be twenty years older, so I'm happy to wait for that, but I am looking forward to the whiskey!

Great piece, Sku. It's for the very reasons you listed that I've resorted to over-hoarding lately. While the purchases can seem excessive, the reality is that age statements are disappearing, prices are going up and the explosive secondary market--which seems to be inflating by 10% or more every month-- will make things even more expensive shortly as flippers multiply and the producers see the potential profits being squandered.

The transition from Elijah Craig 18 to 20 is a perfect example. Heaven Hill adds two years on a label and triples the price, even though many of the EC 18s were already 20 years old. Right on cue, John Hansell dutifully awards it "Whiskey of the Year" and like magic, they're selling the same juice for 300% more. It's a sign of where things are headed, especially when they can get the right people to play ball.

The new E.H. Taylors, none of which are exceptional, are another sign of the overpriced, exploitative market that's developing; "premiumization" as the marketing people might call it. Buffalo Trace is selling a cask strength 7 year old for the same price as their George T. Stagg. Not a good omen.

The new Port Charlotte offerings from Bruichladdich are fantastic, but are $90+ for very young whiskey. Same with Kilchoman. It's doubtful those prices will come down as the spirits mature. Laphroaig Cask Strength at $55 is one of the last remaining bargains on the shelf, so again, I stock up.

Worst of all, the retailers are getting hip to the prices. A local independent store is now selling William Larue Weller for $92, when they had it for $70 a few months ago. Why? They saw the prices on eBay and adjusted accordingly. I've seen other retailers do the same with the Parker's Heritage bottles, Van Winkles and other limited editions.

So often, people debate "bargain" whiskeys in the under $30 category, but I think the best values are still bottles like Stagg: 18 years+, high proof cask strength and splendid taste for under $80. Between the flippers, venal retailers, and increased demand for an increasingly scarce product, even these post-Golden Age days won't last. And even if prices remain somewhat constant, it's a part-time job to secure a bottle.

The better retailers like K&L are trying to keep prices down and continue to make great single barrel selections, but that can't stop this tidal wave. If the micros were making better stuff I'd be more optimistic, but other than Balcones offerings, I haven't enjoyed much. There are still good values in bourbon, like the Four Roses or Bowman single barrels , but they're becoming increasingly anomalous.

On an unrelated note, I got a chuckle out of Jason lamenting the Van Winkle flippers--especially since he has sold 2 Lot B bottles and 3 ORVW 10/90s since May on eBay. I guess since he spends so much time posting sycophantic love letters about the VW family on other message boards, the ethics of scalping don't apply to him.

One thing, however - the Kilchoman point needs a bit of perspective. It literally costs them more to make whisky because they don't get the Diageo rub when buying malt from Port Ellen, and they're not buying bulk, so much like K&L when we buy Balvenie 12, they're not getting the deepest discount.

What you have to decipher as a whisky fan, and me as a whisky buyer, is this question: should they still make it even though it costs more? I agree with BarrelChar that there is little hope in the American craft movement. It also costs these tiny distilleries much more to produce their whiskies and they end up tasting worse than the mass-produced options. Kilchoman, however, is a different story. I think their whiskies are wonderful and, seeing that I know how much it costs to make them, I don't mind paying extra.

David, great point on Kilchoman, and I almost mentioned their much-higher operating costs, but I figured my post was already a bit "tl;dr" for everyone. But you're right: it's unfair to compare Kilchoman's prices to Buffalo Trace's cynical marketing shtick or the smorgasbord of overpriced, under-aged American faux-craft swill.

I really enjoyed SpiritsJournal posts about Kilchoman detailing the tremendous care they give to their product and how amazingly small their operation is; and I plan to buy the single Kilchoman sherry cask bottles you've just recently listed. They sound phenomenal.

Having said all that, it's still an expensive, young product that's out of reach for most budgets, save for the wealthy or degenerate whiskey addicts like me. And that's the sad thing: there will be more fine whiskey--both foreign and domestic--over the next few years, but it will come in trickles or cost a lot; or both.

With regard to the American craft distillers, no matter how long you age most of that stuff, it'll likely never be great. And even if it were cheaper, I wouldn't buy it--the quality just isn't there.

I think the key to stopping some of the more pernicious trends in whiskey will be honest reviewers like the guys at LAWhiskeySociety, who aren't compromised by advertising dollars, industry connections and the giant grab bag of freebies from the distilleries.

You've often mentioned Jim Murray's rather inexplicable review for Old Pulteney 21 and what it's done to wholesale prices and retail demand for that product. And the damage isn't limited to that particular bottle, it infests the industry. Once Thai Beverages figures out they can raise the prices on OP 21, they'll follow suit with Glenlivet. And the other producers will copy that trend, as they already are. Domestically, Beam Global announced a price hike in May, which paves the way for their competitors to do the same.

If whiskeys are bad and/or overpriced, reviewers should say so. Not everything can be an "85/B" or better. And we as consumers should stop buying bad products or ones that increase unfairly in price.

But given the overwhelming profiteering trends at the retail and secondary markets, undereducated American consumers jumping on the bandwagon, and global demand for whiskey--especially from Asia--producing further shortages, I'm not optimistic. Maybe we'll see prices correct back to reality, but I fear it's far more likely we'll see "Red Stag Black Cherry" get WhiskeyAdvocate's "Whiskey of the Year" and then Beam will start selling it for $100 a bottle.

David, I neglected to again mention that you deserve heaps of credit for trying to hold the line on prices and keep them as reasonable as possible for both the usual retail whiskeys and your single barrel selections, even though it means you're making far less per bottle. And your transparency about all of these pricing trends on the SpiritsJournal page is appreciated.

If more retailers stepped up to the plate like you and worked together to fight these price increases, consumers have a fighting chance. But sadly, I think you're the outlier (along with a few other retailers) and the big producers will squeeze your bottom line before sacrificing a dollar in their own profit margins.

Sku,. you are right on the money. My institutional memory is longer than most, having cut its teeth on Sam Thompson Pennsylvania rye in the late 70s when the glut was just getting started, and as you state, it's just now beginning to recede dramatically.

There will always be bargains, relatively speaking, but the Good Old Days are definitely behind us.

Also, there are strong signs that the craft distilling movement is gaining some footing as regards quality, and I'm far from giving up on them so soon. They will have more to say as time goes on. Stay tuned!

Don't forget the wonderful Leopold Brothers. They are making some unique whiskies that combine tradition and distilling skill, and aren't scalping us on price. Hopefully their expansion will allow broader distribution.

I had to ditch some of them to make room for other bottles and don't have the friends that many have. And, was not aware of their bitterness on the after market until recently. And, this will be my last post as I have no time for arguments!

As to the other bottles, they were sold at a lost and not a profit.Sorry, SKU, for not being able to contribute anymore on such matters as the future of LDI and PHC releases that I gathered first hand.

Appreciate the kind words, but I wasn't referring to us directly, although we will have BIB, 10's and 15 year old whiskey aging starting this spring at our new plant...

What I meant was that big money is hitting the small distilleries. Plenty of ex-bankers, ala Jim Koch in beer, are getting in of late, and this means what you cats like..... older stocks of whiskey because they've got bottomless access to capital. And the big wine and beer conglomerates are sniffing around, looking for small distilleries to buy/capitalize. This will mean more capital, and older, high margin bottlings. There's blood in the water, and the sharks are gathering.

Mr. Leopold's joint was one of the 'cream of the crop' I was referring to. Though a lot can change in 20 years.

Todd, the sharks you describe are a perfect image of over-exposure. From what I understand (not being a beer groupie) beer has been such for some time, though of course without the aging, this is an entirely different ballgame.

What's disturbing is that as more money is pumped into distilleries owned by corporations, everything follows in getting more expensive for the little guys. Talk about sharks.